Office REITs: The New Normal?

April 6, 2022 | Hoya Capital

Office REITs: The New Normal? REIT Rankings Sector R... Apr 6 Written By Back To The Office, Finally? Office REITs - which lagged over the prior two years from persistent pandemic-related headwinds - have been the best-performing major property sector in early 2022. Two years into the pandemic, office utilization rates have recovered only 40% of pre-COVID levels in primary coastal markets, with a particularly slow recovery in markets with longer transit-heavy commutes.

For many, Work-From-Home will transition to "hybrid" work environments over the next quarter, setting up a "now or never" dynamic for utilization rates that corporate decision-makers will be monitoring closely. Employees value hybrid WFH the same as a 10% pay rise, but most don't want to be fully remote either. With an increasingly tight labor market, employees - not employers - will chart the future of the workplace. Office leasing demand - and earnings results from these office REITs - has been surprisingly resilient, however, particularly for REITs focused on business-friendly Sunbelt regions and specialty lab space.

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